Facebook’s profit doubles on robust advertising growth
29 July, 2021
Facebook reported an annual 101 per cent rise in second-quarter net profit, driven by strong advertising sales growth.
Net profit surged to $10.4 billion in the three months to June 30, almost 9.4 per cent up on a quarterly basis.
Revenue during the period rose 56 per cent to more than $29bn, surpassing the $27.9bn estimates made by analysts, Refinitiv said. This was the fastest revenue growth since 2016, exceeding the first quarter’s growth of 48 per cent.
Advertising revenue, which soared 56 per cent a year, added more than $28.5bn to Facebook’s overall revenue. Revenue from other streams — including consumer hardware — rose 36 per cent on an annual basis to $497 million.
“We had a strong quarter as we continue to help businesses grow and people stay connected,” Facebook’s founder and chief executive Mark Zuckerberg said.
“I am excited to see our major initiatives around creators and community, commerce … and building the next computing platform coming together to start to bring the vision of the metaverse to life,” he added.
Advertising revenue growth in the second quarter was driven by a 47 per cent year-on-year increase in the average price per advertisement and a 6 per cent rise in the number of advertisements delivered.
Facebook’s stock was down about 4 per cent in after-hours trading. Its shares have gained almost 60 per cent in the past 12 months and close to 39 per cent since the start of this year.
In its financial guidance for the third and fourth quarters, Facebook expects the annual revenue growth rates to “decelerate significantly on a sequential basis as we lap periods of increasingly strong growth”, David Wehner, Facebook’s chief financial officer, said.
“We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter,” Mr Wehner said.
Apple’s update to its operating system is intended to make it harder for advertisers to track people as they rotate between different apps on their device.
People will be given the option to opt in or out of app tracking. This will restrict how technology companies such as Facebook and Google gather data for advertising purposes.
The platform's daily active users grew 7 per cent yearly to reach more than 1.9 billion in the last quarter. Its monthly active users increased 7 per cent to almost 2.9 billion.
“Similar to the second quarter, we expect that advertising revenue growth will be driven primarily by year-over-year advertising price increases during the rest of 2021,” Mr Wehner said.
The California-based company’s capital expenditure, including principal payments on finance leases, in the second quarter was $4.7bn. It is expected to be in the range of $19bn to $21bn for the 2021 full financial year, driven primarily by its investments in data centres, servers, network infrastructure and office facilities.
Facebook expects 2021 financial year’s total expenses to be in the range of $70bn to $73bn. The year-over-year growth in expenses is driven primarily by investments in technical and product talent, infrastructure and consumer hardware-related costs, it said in a statement.
“Our expense outlook reflects our commitment to invest ahead of the compelling long-term growth opportunities we see across our product portfolio,” said Mr Wehner.
Cash and cash equivalents and marketable securities were $64.08bn as of June 30, the company said.
Facebook, which owns Instagram and WhatsApp, saw a sharp rise in the number of users of its platforms during the pandemic.
Many people switched to social media and home entertainment options during the Covid-induced lockdowns.
To attract more users to its platform, the company this month announced it would pay out $1bn by the end of next year to creators for the content they produce on Facebook and Instagram. The money will be paid to creators for achieving “certain milestones” and for the advertisements running on their videos on these platforms.
Source: www.thenationalnews.com